Tax Addition on cash found during search deleted when same has already been offered to tax by group company

M/s. Sparco Engineering Pvt. Ltd. V/s. Asstt. Commissioner of Income Tax

(Order pronounced in the open court on 07th June, 2022)

The assessee is a part of S.M. Auto Group i.e. M/s. S.M. Auto Engineering Pvt. Ltd. having common registered office in Pune. A search and seizure was conducted on SMAEPL and incriminating material said to be under-invoicing of scrap sale was found. According to the AO, the seized material is about the quantum of cash generated by the assessee group, he observed that the assessee group is substantially suppressing its scrap sale to an extent of Rs. 2,26,41,000. Further, the said page is a summary revealing scrap generation during the period 17-06-2004 to 31-05-2008 and the assessee group received Rs. 4,89,17,082.51 through banking channel and the difference of actual cash of Rs. 2,26,41,000 (Rs. 2,77,90,196.91 – Rs. 51,49,196.91) was not recorded in the books of account. Accordingly, AO added an amount of Rs. 9,97,920 to the total income of the assessee in respect of the year under consideration.

In Appeal before CIT(A), the order of AO to add the amount to total income of assessee was confirmed by the CIT(A).

Appeal Before the Tribunal: Tribunal noted that the SMAEPL which is flagship company of assessee where extra scrap was impounded, the said SMAEPL offered more than cash receipt as projected by the AO. The only contention of ld. AR was that when the SMAEPL offered the said amount on behalf of the group companies and no addition is maintainable in the hands of the assessee which is accepted by the tribunal so the amount of Rs. 3,71,94,261 which is above the cash receipt projected by the AO offered to tax in the hands of SMAEPL in which the assessee is sister concern, in whose hands the AO made addition again is not maintainable.

On perusal of the said report the tribunal noted that the ACIT clearly stated that the assessee group disclosed additional income of Rs. 3,99,94,261 on account of unaccounted scrap sale but however the said additional income was offered only in the hands of SMAEPL but not in the hands of other two group companies. Therefore, the contentions of ld. DR that the additional income was offered in the SMAEPL excluded the other two group companies was rejected by the tribunal. Hence, the appeal of assessee is allowed.

As the issue raised in the appeal and the facts in ITA Nos. 2407 to 2412/PUN/2016 are identical to ITA No. 2406/PUN/2016 except the variance in amount the findings of ITA No. 2406/PUN/2016 would mutatis mutandis apply to ITA Nos. 2407 to 2412/PUN/2016, as well. The appeals of the assessee are allowed, accordingly.

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